NAFCU to House Financial Services: regulatory burden is top challenge facing credit unions

WASHINGTON, DC (March 18, 2015) — Patriot Federal Credit Union President and CEO Peggy Bosma-LaMascus will testify today on behalf of the National Association of Federal Credit Unions (NAFCU) before a House Financial Services Committee hearing on regulatory relief. Bosma-LaMascus is telling lawmakers that “regulatory burden is the top challenge facing all credit unions” and is seeking action from Congress and regulatory agencies to provide relief for credit unions and their members.

LaMascus, whose credit union is headquartered in Chambersburg, Pa., is testifying before the committee in today’s hearing, “Preserving Consumer Choice and Financial Independence,” which began at 10 a.m. Eastern.

Increased Regulatory Burden Has Impacted Credit Unions and its Members

LaMascus, in her written testimony, stresses that credit unions have a long history of helping the economy grow, even during the recent financial crisis, but remain highly regulated and face restrictions on whom they can serve and their ability to raise capital. She highlights a 2012 NAFCU survey of the association’s members that found 94 percent of respondents had seen their compliance burdens increase since the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010.

LaMascus discusses how regulatory burden has led to an increase in her credit union’s compliance costs. Such costs are hurting not only Patriot FCU but numerous credit unions and credit union members. “Many credit unions find themselves in the same situation, as a March 2013 survey of NAFCU members found that nearly 27 percent had increased their full-time equivalents (FTEs) for compliance personnel in 2013, as compared to 2012,” says LaMascus. “That same survey found that over 70 percent of respondents have had non-compliance staff members take on compliance-related duties due to the increasing regulatory burden.”

NAFCU 2015 Plan for Credit Unions’ Regulatory Relief

With the need for regulatory relief even greater in 2015, NAFCU has released an updated version of its original five-point plan for regulatory relief for credit unions. In addition, the association has updated its initial “Dirty Dozen” list of rules it would like to see amended or eliminated. “While some slight progress was made on several of these recommendations, we have updated that list for 2015 to outline the ‘Top Ten’ regulations that regulators can and should act on now to provide relief,” says LaMascus.

NCUA’s Second Risk-Based Capital Proposal: Still a Solution in Search of a Problem

LaMascus’ testimony also highlights many proposals being issued by regulatory agencies that have the potential to impact credit unions’ ability to provide members with the services they need and want. An example of this is the National Credit Union Administration’s (NCUA) revised risk-based capital proposal.

LaMascus discusses NAFCU’s unwavering position that NCUA’s proposal is unnecessary and will overly burden credit unions and the communities they serve. “NAFCU’s analysis estimates that credit unions’ capital cushions (a practice encouraged by NCUA’s own examiners) will suffer over a $470 million hit if NCUA promulgates separate risk-based capital thresholds for well-capitalized and adequately capitalized credit unions (a ‘two-tier’ approach),” she says in her testimony.

Credit Unions’ Field-of-Membership (FOM) Rules Need Modernization

LaMascus says field-of- membership (FOM) rules need to be modernized legislatively, but some updates can be made now by NCUA.

“NCUA can remedy and streamline the current field of membership expansion procedures by issuing interpretive guidance outlining a more transparent process,” LaMascus says.

LaMascus refers to a January 2015 NCUA Board meeting during which agency Vice Chairman Rick Metsger talked about the need for NCUA to take a “fresh look” at the agency’s application process for FOM expansion requests.

Regulatory Improvements to CFPB Rules

LaMascus discusses how new regulations from the Consumer Financial Protection Bureau (CFPB) have had unintended consequences in the lending market “In particular, the ability-to-repay, qualified mortgage and mortgage servicing rules have required credit unions of various sizes and complexities to make major investments, and incur significant expenses,” she says in her testimony.

LaMascus recommends that CFPB use its legal authority to exempt credit unions from various rulemakings; amend Regulation E to allow financial institutions to truncate account numbers on periodic statements; expand the threshold for the safe harbor from the definition of “remittance transfer provider” to ensure that a meaningful safe harbor is established; limit the changes to the Home Mortgage Disclosure Act (HMDA) data set to information mandated by the Dodd-Frank Act; and make improvements to the integrated disclosures rule under the Truth in Lending Act (TILA) and Real Estate Settlement Procedures Act (RESPA) and the Qualified Mortgage (QM) standard.

NAFCU Backs Regulatory Relief Bills

LaMascus’ testimony urges support for a number of bills that were introduced in the House, including:

H.R. 1188, the “Credit Union Small Business Jobs Creation Act”;
H.R. 1133, the bill would exclude veterans’ loans from the statutory credit union member business lending (MBL) cap;
H.R. 989, the “Capital Access for Small Businesses and Jobs Act”;
H.R. 1233, the “Community Lending Enhancement and Regulatory Relief Act of 2015”;
H.R. 1176, the “NCUA Budget Transparency Act”;
H.R. 685, the “Mortgage Choice Act”;
H.R. 1210, the “Portfolio Lending and Mortgage Access Act”;
H.R. 601, the “Eliminate Privacy Notice Confusion Act”;
H.R. 1266, the “Financial Product Safety Commission Act of 2015”;
H.R. 1261, the “Bureau of Consumer Financial Protection Act”; and
H.R. 1259, the “Helping Expand Lending Practices (HELP) in Rural Communities Act.”
In closing, LaMascus says, “NAFCU appreciates the Committee holding this hearing today. Moving forward, we would urge the Committee to act on credit union relief measures pending before the House and the additional issues outlined in NAFCU’s Five Point Plan for Credit Union Regulatory Relief and NAFCU’s ‘Top Ten’ list of regulations to review and amend.”

The National Association of Federal Credit Unions is the only national trade association that exclusively represents the interests of federally chartered credit unions before the federal government and the public.

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